“Valeant Faces RICO Suit in ‘Secret’ Pharmacy Network Row,” Law360

May 31, 2016

Valeant Pharmaceuticals International Inc. was hit Friday with a proposed class action accusing the drug company and its executives of violating the Racketeer Influenced and Corrupt Organizations Act with an alleged scheme to block the company’s drugs from competition through a "secret network of captive pharmacies."

The suit — filed by AirConditioning and Refrigeration Industry Health and Welfare Trust Fund, along with Fire and Police Health Care Fund, San Antonio — accuses Valeant of using the network to stifle competition and fraudulently inflate the prices of the company’s products. Citron Research, a stock commentary website, previously accused Valeant of counting inventory shipments to specialty pharmacies as revenue.

Citron went so far as to speculate that Valeant is a “pharmaceutical Enron” cooking its books through dispensers including Philidor Rx Services LLC, which is also named as a defendant.

Friday’s suit noted that term in its claims, which say Valeant used fraudulent practices to improperly inflate the reimbursements for drugs paid for by third-party payors, including the plaintiffs in the instant case.

“Through their fraudulent scheme, defendants obtained hundreds of millions of dollars in ill-gotten profits at the expense of the TPP class, whose members paid inflated prices for Valeant drugs that in many cases should never have been dispensed,” the suit says. “Indeed, in 2015 alone, Valeant channeled nearly $500 million worth of its drugs through Philidor, its central pharmacy hub.”